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Broadcom sales forecast misses estimates

April 27, 2011

Broadcom Corp., the biggest maker of chips for television set-top boxes, declined after the company forecast second-quarter revenue that missed analysts' estimates, citing a slowdown in sales to mobile-phone makers.

The shares dropped $3.34, or 8.3 percent, to $37.07 as of 8:19 a.m. New York time in early Nasdaq Stock Market trading. The stock fell 7.2 percent this year before today.

Broadcom's wireless and consumer-electronics customers are facing steeper competition, with Nokia Oyj and Samsung Electronics Co. each reporting lower profit in the recent quarter. Some of Broadcom's TV-systems clients were also affected by the March 11 earthquake and tsunami in Japan, said Doug Freedman, an analyst at Gleacher & Co.

"This company has had a lot of issues crop up," said Freedman, who rates Broadcom shares "buy." "Some of their smartphone customers -- Samsung and Nokia -- didn't have great quarters."

Revenue in the current period will be $1.75 billion to $1.85 billion, Irvine, California-based Broadcom said yesterday in a statement. That compared with the average analyst estimate of $1.89 billion, according to a Bloomberg survey. A year earlier, sales were $1.6 billion.

Sales in the first quarter rose 24 percent to $1.82 billion, compared with analysts' average estimate of $1.81 billion. Net income increased to $228 million, or 40 cents a share, from $210 million, or 40 cents, a year earlier, Broadcom said.

The company's gross margin -- the percentage of sales left after subtracting production costs -- was 51 percent in the first quarter, in line with analysts' estimates.

"The quarter was fine, but the guidance was light," Stacy A. Rasgon, an analyst at Sanford C. Bernstein & Co. who has a "market perform" rating on the stock, said in an interview yesterday. "This is a stock investors are buying because they want revenue growth. I don't know if this is a one-quarter blip or a longer-term story."

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